Can Trump Use Economic Warfare to America’s Advantage?

BIANNA GOLODRYGA, ANCHOR: And as we’ve just heard, Trump is waging a global trade war against allies and adversaries alike by weaponizing tariffs. But are they effective tools to get the U.S. what it wants? Our next guest, Edward Fishman, believes that overusing America’s leverage comes with great risks, both to the nation’s economy and the global world order. And he joins Michel Martin to discuss.

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MICHEL MARTIN, CONTRIBUTOR: Thanks, Bianna. Edward Fishman, thanks so much for joining us.

EDWARD FISHMAN, AUTHOR, “CHOKEPOINTS”: Michel, it’s great to be here. Thanks for having me.

MARTIN: So, in your new book, “Chokepoints,” you argue that the global economy has become a kind of a battlefield. And I just want to point out here that you’re a former state department official who actually helped design U.S. sanctions policy. You wrote that, in today’s geopolitical battles business executives have become the frontline troops. They’re the ones implementing economic pressure campaigns, not soldiers, not spies, and not diplomats. How does that change the way the U.S. has operated on the world stage? Where do we see this show up?

FISHMAN: We see it everywhere. You know, we’re living in an age of economic warfare today, Michel, in which sanctions, tariffs, and export controls have become the primary way that big countries compete with one another. It’s certainly true of the United States, but it’s increasingly becoming true of other countries as well. You know, China, the European Union, Russia, they’re also developing these tools. And I think a good way to explain sort of what’s changed and why, you know, in the last two decades, we really entered this age of economic warfare. If you go back to the 1990s when the United Nations imposed an embargo on Saddam Hussein’s Iraq, which some people may remember after the Gulf War in 1990 and 1991, in order to stop Iraq from actually selling oil on global markets, the United States and 20 other countries had to patrol the Persian Gulf 24/7 and inspect cargoes going in and out of Iraq’s ports around the clock. But what happened, Michel, is in the wake of hyper globalization in the ’90s, when you bring Russia and China and other countries into the global financial system and supply chains, we now have a system today where Donald Trump can sign an executive order in the Oval Office and impose dramatic economic pain on foreign countries just with the stroke of a pen. And so, the big revolution that we’ve seen is that the threshold for the use of economic warfare has gone way down, where we no longer need to deploy the military to make sanctions work, and the impact has gone way up. And so, I think that’s why today we are living in such a new age of economic warfare.

MARTIN: You argue that the U.S. has come to dominate this invisible infrastructure of global finance and trade. How did that happen? Because I think, again, that’s another thing that I think a lot of Americans might be surprised by and also frustrated by, because I think that they look at a situation like Russia and Ukraine and wonder why hasn’t the U.S. been more effective in, you know, in ending this conflict, especially through the use of sort of economic needs. How did that happen?

FISHMAN: Sure. Yes. So, the reason my book is called “Chokepoints” is that in the wake of hyper globalization in the ’90s, when you really do see even countries like China and Russia enter a dollar-based financial system, when their trade is even being denominated in dollars, when they’re not even transacting with United States, what happens is there are these chokepoints that develop, where one country has a dominant position and there are very few, if any, substitutes. The dollar and the financial system is the best example of this, because there really is not a direct substitute for the dollar. There’s no other currency that plays even close to the role that the dollar plays. The vast majority of transactions in the financial system are using the dollar. But there are other chokepoints too. Semiconductor supply chains is one where Silicon Valley companies dominate, and it’s why the U.S. can do things like impose export controls on big Chinese companies like Huawei that are impactful. If you’re asking why with such power over some of the most important chokepoints, like the financial system and semiconductor supply chains, we haven’t delivered a knockout blow to Russia. I think it’s less about Russia finding brilliant ways to evade sanctions and more about us being unwilling to actually bring to bear the most potent weapons we have.

MARTIN: And why is that?

FISHMAN: Yes, sure.

MARTIN: Why is that?

FISHMAN: Because when you think about Russia, the vast majority of the foreign exchange that they’re generating is coming through oil and gas exports. And really, actually, oil exports number one. And the Biden administration, really throughout 2022 and 2023, was very hesitant to do sanctions that would potentially impede Russia from selling oil on global markets because they were worried about worsening inflation in the United States and spiking oil prices that may cause Americans to have higher prices at the pump. And by the way, it’s possible that Donald Trump will be inhibited by the same concern. You know, we’ve seen Donald Trump talk about wanting to bring oil prices down.

MARTIN: Yes.

FISHMAN: And so, you know, that could be part of the reason we haven’t seen aggressive sanctions on Russia or Iran for that matter.

MARTIN: Since you have been in the room where some of these decisions were made, is there something you can tell us, you know, about how these decisions are made that is either surprising to you, or that a lot of Americans would be in, would be surprised to hear?

FISHMAN: Yeah, I’m glad you asked that. ’cause It really gets to the reason why I wrote “Chokepoints.” So I was lucky enough to be involved in some of these conversations leading up to the Iran nuclear deal in 2013, 2014, 2015, in response to Russia’s first invasion of Ukraine in 2014 when they annexed Crimea. And one thing that frustrated me, Michel, is when we would go into the situation room to debate, you know, what to do against Putin after he had annexed Crimea, and we would discuss things like whether or not to arm the Ukrainians, everyone at the table in the situation room had an opinion. It wasn’t just the Pentagon, you know, the CIA had an opinion. The State Department had an opinion, everyone thought that they could weigh in. But when economic warfare came up, when sanctions came up, the room would go quiet. And I think that’s because despite the fact that sanctions have become the primary tool America uses to many Americans, including people who are in power, they feel a little arcane. Like, we don’t, like we, we don’t really know how they work. And so usually you’d have one or two people dominating the conversation. And I worried that, you know, we were living in an age of economic warfare and we weren’t really equipped to make really sound decisions. And so my biggest hope really in writing this book “Chokepoints,” is to be able to elevate our national conversation in the United States about the use of sanctions, but also internationally. Because again, it’s not just the United States who’s using these tools.

MARTIN: Are tariffs a form of economic sanctions?

FISHMAN: Yes. So, it’s interesting, because historically, they really haven’t been. You know, historically we’ve used tariffs for more economic reasons, right? I mean, very early American history, during — even back to George Washington, tariffs were used to raise revenue for the government. They were in place before the income tax, for instance. Mind you, back then, the U.S. government was tiny, right? It was much, much smaller than we have today. More recently and more plausibly, sanctions can be used to protect domestic industries against foreign competition. A really good example of this is during the Biden administration the United States imposed 100 percent tariffs on Chinese electric vehicles because they were worried that if cheaper, more efficient Chinese electric vehicles flooded the American market, it would hurt companies like Tesla who are producing electric vehicles for the United States. What Trump has done is he’s been using tariffs and been claiming to use tariffs to raise revenue and to protect domestic industries, but he’s moved beyond that to say that tariffs are just another form of sanction that we could use tariffs to force the Mexicans to put more troops on the southern border or compel Canada to become the 51st state, or even, you know, to pressure countries all over the world to stop buying Venezuelan oil, which is something he’s done in recent days. You know, these — what he’s called secondary tariffs. So, I think under Trump we’ve seen a much more expansive use of tariffs that looks much more like economic warfare and less like a tool of standard economic policy.

MARTIN: That’s fascinating because, you know, one of the big questions about tariffs, this is one reason why Ronald Reagan, for example, was opposed to them. I mean, because he was a true conservative who believed — at least he was a true economic conservative who believed that it wasn’t the government’s place to be picking winners and losers. Is President Trump using tariffs to favor and disfavor certain American industries, or is he using them to advance kind of geopolitical interests apart from the winners and losers on the American side?

FISHMAN: Sure. I mean, we’ve seen Trump talk about tariffs as basically a magic bullet to cure all of our problems, right? It’s raising revenue, it’s protecting, you know, the steel industry or the car industry, and it’s, you know, pressuring other governments to basically bend to his will. He’s trying to use it as this cure-all for all of our problems. I don’t think that’s a wise use of tariffs personally. To what you said about Ronald Reagan, I think it’s a great point, because something people don’t realize and surprising because it’s very basic, is that tariffs are a tax on imports. So, who pays the tariff? It’s a United States company that’s importing a good. And the way I think about it is, you know, I make my daughter pancakes every Saturday morning. Canada is a big exporter of maple syrup. If we have a 25 percent tariff on Canada, I can still buy my daughter’s maple syrup. I just have to pay 25 percent more than I would otherwise, right? So, it is not the most efficient use of economic policy. It is not — you know, it is government intervention in the economy. It’s why, you know, conservatives like Ronald Reagan haven’t liked tariffs. The thing though, that’s interesting, Michel, is if you’re thinking about tariffs as a form of economic warfare, they’re actually a very weak tool. So, to go back to the maple syrup example, now, let’s say Trump were to impose sanctions on the Canadian maple syrup company, right? I would not be allowed to buy that maple syrup. It’d be illegal to buy any maple syrup. And more to the point, because that Canadian maple syrup company would no longer have access to the U.S. financial system, it may well go bankrupt the next day. So, sanctions are a much, much more powerful geopolitical tool than tariffs are. And you know, Trump clearly loves tariffs. He calls himself a tariff man. But I think he’s going to be disappointed when he tries to use tariffs to really cure all of our problems.

MARTIN: Do you understand why, or do you have any sense of why President Trump is so enamored of tariffs as a part of this kind of global or geopolitical strategy?

FISHMAN: Yeah, sure. So, you know, there are very few things that Donald Trump is consistent on. But tariffs is actually one of them, right? If you go back even to the eighties when he was, you know, far from politics, he was advocating for tariffs and saying that, you know, we were losing to Japan because we were running a giant trade deficit with Japan. We were importing much more from Japan than Japan was importing from us. And that the, so we should tax those imports, right? And Trump actually, I think there’s a really important comment he makes in his first term ’cause I think it’s in some ways helps us understand his mentality where he says, because we’re running such big deficits, trade wars are good and easy to win.  The problem is that’s a mentality going back to the eighties. This is before the age of economic warfare that I describe in my book, right? What we have now is we have multi-domain economic war happening. We have tools that are much stronger than tariffs, like sanctions and export controls. And the thing I’m worried about right now, Michel, is if you look about how China has retaliated against the early tariffs of this second Trump administration, it hasn’t just been with their own tariffs. They’ve retaliated with sanctions. They’ve imposed sanctions on PVH, the American Apparel Company, on Illumina, the American DNA sequencer on Skydio, the biggest drone company in Silicon Valley that have caused significant problems for these American companies. They’ve imposed export controls on critical minerals to the US that we rely on from everything from ammunition to batteries, right? And then, you know, they’ve launched anti-monopoly investigations into big tech companies like Google and Nvidia. So what we risk today isn’t so much a trade war. I actually think that’s a misnomer. It’s really a multi-domain economic war. And I think it’s the reason that, you know, I do fear that Trump is playing with fire with these tariffs.

MARTIN: When is this car going to crash? When are American consumers likely to feel the effects of this, or are they already?

FISHMAN: So, I think one of the ironies is so far, right, and I think things could change very soon, Trump has been threatening tariffs and then retracting them or putting them in place and then pulling back. And so, the irony is that what’s happened, and I think what we will see in the data, is in the first quarter of this year, the U.S. trade deficit has spiked because Americans are panic buying, basically they’re hoarding, they’re buying more than they otherwise would be. And if Trump keeps kind of this, you know, half in, half out approach, I think that’s what’s going to keep happening. You’re going to see more hoarding and you’re not actually going to see the change in behavior that Trump wants. Let’s see a — let’s say Trump does, you know, put these tariffs in place in, you know, this month in April, and they stay in place, right, because he really wants to re-shore all of the components of the auto industry, right. Americans are going to feel that very soon, right, because it’s not like the auto industry has huge numbers of, you know, cars and inventory that are already built, right? Pretty soon, within a few weeks of those tariffs going into effect, you’ll see car prices start going up. I think now would be probably the time to build a car. So, in terms of when things could go off the rails, I mean, the thing I’m worried about is for sure the impact on the American economy. But I think we also need to zoom out a second and think about what kind of a world does this usher in, right? If there is a world where we’re imposing sanctions and tariffs, not just against the Chinas and Russias of the world, not just against our adversaries, but against Canada, Mexico, the European Union, basically everyone, we kind of wind up backing into autarchy, you know, this notion where everything has to be just be made inthe U.S. And that vision is one that historically has inspired things like imperialism and conquest. Because if you don’t feel comfortable that you can just buy resources from a place like Greenland, the mentality is, well, maybe we need to conquer it and plant the flag there, you know, to have secure access to resources. And so, I worry, not just so much for the near-term, you know, inflation or, you know, how it’s affecting our pocketbooks, I worry about, you know, the next five to 10 years, what does this mean for the global order? What does this mean for the risk of warfare, not just economic warfare?

MARTIN: Speaking of warfare, let’s talk about Russia. The — we started our conversation by talking about the fact that the Biden administration did impose sanctions on Russia in an effort to curb, you know, their aggression into Ukraine. So, what about now? Is there additional capacity there that could bring — that could put more pressure on Russia to bring them to the negotiating table, to bring this conflict to an end? The president says that he wants this conflict to end. Are there tools that he’s not using?

FISHMAN: For sure. And I think maybe one thing just to level set on, then I’ll answer your question directly, is there has been a lot of disappointment with these Russia sanctions. They — you know, people think that they haven’t worked, right? But I’ll remind folks that, you know, the big Russia sanctions went into effect about three years ago, right, right after the invasion in February of 2022. And by now, three years later, the Russian economy is poised for zero growth in 2025. And significant inflation with their interest rate well over 20 percent mortgages in Russia, and you can’t get for anything below 30 percent. So, the Russian economy is not doing very well. And when you think about it, like three years is actually not that long. You know, the Iran sanctions campaign that led to the nuclear deal started in earnest in 2006, and we didn’t get the first nuclear deal until 2013. So, that’s seven years, right? So, these campaigns do take a while. I think part of the reason, Michel, you’re seeing Putin so desperate right now for a bilateral deal with Trump, to try to persuade Trump that we need to normalize U.S.-Russian relations is because he realizes that his economy can’t go on the way it is for another two years, right? He needs some — a lifeboat to be sent to him by the United States. Let’s say Trump realizes this and says, you know what, I really want to end the war in Ukraine. He could ramp up pressure and accelerate that timeline. He could say, well, you know, we are going to impose much more aggressive sanctions on Russian oil and gas. And if we were to do that now, maybe instead of, you know, facing a crisis in one or two years, Putin may face a crisis in three to six months, in which case he’d have a big incentive to make a peace deal to today that may not meet his maximalist objectives.

MARTIN: Before I let you go, you started by saying, I know you’re concerned that this sort of economic warfare can lead to other forms of warfare. I mean, a lot of this — all this debate about and discussion around tariffs is deeply unsettling to the business community, to the markets, and inevitably to consumers. But do you think that in a way this is elevated our understanding of this to the point where perhaps people are taking it more seriously and educating themselves about it more?

FISHMAN: I do think so. And what I’ll say is, you know, my book, “Chokepoints,” came out in the United States at the end of February. And so, it’s been out for a little bit over a month now, and, you know, it’s done incredibly well. It’s been a, you know, New York Times bestseller, which I don’t think many people would’ve assumed was possible for, you know, a book on sanctions and economic warfare and tariffs. I’ve found audiences, you know, all around the country and soon in other countries, very receptive to this. And so, I’m hopeful that, you know, my book could play a small role in elevating that national conversation that people are educating themselves about this topic. And obviously, I would not want these circumstances to be ones in which people are educating them for — themselves about it. But I think there’s an important point here, which is the age of economic warfare predates Trump, right? This is a secular trend that started during George W. Bush’s presidency, that has accelerated during Obama, then Trump, then Biden, and then, now Trump again. So — and it’s almost certain to outlast this current Trump administration as well. So, if this is sort of the push that we all need to learn about these tools, to take them seriously, to keep America and our countries, our families safe in this age of economic warfare, then maybe that is a silver lining of all the chaos we’re seeing today.

MARTIN: Edward Fishman, thanks so much for talking with us and sharing this expertise.

FISHMAN: Thank you, Michel. I really enjoyed the conversation.